A controversial Georgia Court of Appeals decision limiting the scope of Georgia mechanics’ liens to the value of materials and labor was recently overturned by an amendment to the lien law that will take effect on July 1, 2013. To read the full text of the amendment adding O.C.G.A. § 44-14-361(c) & (d) to Georgia’s lien code, go to http://www.legis.ga.gov/Legislation/20132014/136963.pdf (last visited 6/26/2013).
On July 11, 2012, in 182 Tenth, LLC v. Manhattan Construction Co., 316 Ga. App. 776 (2012), the Georgia Court of Appeals held that “general conditions costs” were not lienable. The decision came as a shock to contractors and their counsel as it was contrary to decades of legal application of Georgia lien law. General conditions costs, which had always been assumed to be recoverable under the existing lien laws, can include such things as payment to field personnel, field offices, blue prints, travel costs, clerical and accounting requirements for the project, phone & fax costs, office supplies for field offices, mobilization and rubbish removal. General Conditions can represent a large portion of a contractor’s project costs. In 182 Tenth, the lien claimant and general contractor, Manhattan Construction Company, submitted a number of monthly progress payment applications pursuant to the terms of the contract that had not been paid, totaling $2,126,148.00. Manhattan filed a claim of lien for that total principal amount, which had been certified by the project architect as due under the contract. The amount included at least $1,019,613 allocated to the project as overhead costs and characterized as “general conditions.” Reversing the lower court’s judgment, the Court of Appeals ruled that the general condition costs were not lienable because they were not “labor, services, or materials which actually went into and become a part of the property.” The Court of Appeals also found that “interest due on the unpaid payment applications was not a lienable item.” In the end, the Court excluded from the lien amount over half of the contractor’s claim for payment pursuant to the contract terms!
The revised portion of 44-14-361 provides:
(c) Each special lien specified in subsection (a) of this Code section shall include the amount due and owing the lien claimant under the terms of its express or implied contract, subcontract, or purchase order subject to subsection (e) of Code Section 44-14-361.1.
(d) Each special lien specified in subsection (a) of this Code section shall include interest on the principal amount due in accordance with Code Section 7-4-2 or 7-4-16.
While the purpose of the amendment is to return Georgia’s construction lien laws to the status quo, some commentators suggest that the new language could be abused by Contractors based on the “due and owing” language, which makes the lien claimant’s contract the controlling authority on what amounts are lienable. As a result, and as was the case before the amendment, Contractors should be advised to clearly define in their contracts the amounts they intend to recover as a result of any breaches.